Apollo Aviation Prices $640M Aircraft Lease Securitization


Apollo Aviation Group priced its third aircraft securitization on Friday, October 28, 2016.

Proceeds from the $640 million deal, dubbed Apollo Aviation Securitization Equity Trust 2016-2, will be used to acquire a fleet of 35 aircraft.

“Apollo Aviation continues to deliver value through the strength of its access to the capital markets combined with its specialized knowledge of the mid-life commercial aviation sector,” William Hoffman, the company’s chairman, said in a press release.

The securitization trust will issue three tranches of loans: the senior, $515 million class A loans, expected to be rated single-A by Standard & Poor’s and Kroll Bond Rating Agency, pay 4.25%; the $85 million of class B loans, rated triple-B, pay 6.00%; and $40 million of class C loans, rated double-B, pay 8.00%.

Apollo Aviation Management, an affiliate of Apollo Aviation, will act as servicer for the transaction.

Goldman Sachs is the arranger and structuring agent.

The asset portfolio consists of older mid-life to end-of-life aircraft with an average weighted age of 12.2 years (only four of the jets are considered end-of-life, or beyond 18 years of operation), according to rating agency presale reports. About 25% of the leases are to three airline lessees: American Airlines (five aircraft), Virgin America (three aircraft) and SpiceJet (two aircraft). More than 36% of the portfolio is leased to airlines in the U.S., Indonesia and India.

The transaction came to market in a week when the risk premiums on aircraft ABS were narrowing, helped by strong earnings reports from U.S. airlines, which are some of the biggest lessees, according to Deutsche Bank. In a report published Oct. 24, the bank noted that the market for narrowbody passenger aircraft, such as those backing AASET 2016-2, continued to be far stronger than for widebody aircraft and is likely to remain so for at least on top three years.

This is the third ABS transaction of funds managed by affiliates of Apollo Aviation since 2014. Upon completion of AASET 2016-2, such ABS transactions will have issued or borrowed in aggregate more than $1.7 billion in asset backed secured debt.

Apollo’s previous securitization this year (also arranged by Goldman) was for $510 million in asset-backed loans, with an adjusted base value of $632.2 million for 32 planes with a weighted age of 14.8 years.